M/s. Luthra Dyeing & Printing Mills, Surat V. The DY.CIT., Circle-1, Surat

ITA 2114/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85806 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 26-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Keywords: Depreciation; Bonafide belief; Bonafide mistake

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD , BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. ITA. NO.2114/AHD/2011 (ASSESSMENT YEAR:2005-06) M/S LUTHRA DYEING & PRINTING MILLS (PROP LUTHRA CHEM TEX INDUSTRIES LTD.) 252/2, GIDC, PANDESARA, SURAT APPELL ANT VS. DCIT, CIRCLE-1, SURAT RESPONDENT PAN: AAACL4038Q /BY APPELLANT : MS. URVASHI SHODHAN, A.R. /BY RESPONDENT : SHRI M. K. SINGH, SR. D.R. !' /DATE OF HEARING : 25.02.2015 #$% !' /DATE OF PRONOUNCEMENT :13.03.2015 ITA NO. 2114/AHD/11 A.Y. 05-06 [M/S. LUTHRA DYEING & PRINTING MILLS VS. DCIT] PAGE 2 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, SU RAT, DATED 24.06.2011 FOR A.Y. 2005-06 ON THE FOLLOWING GROUND : 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING PENALTY LEVIED BY ASSESSING OFFICER U/S 271(1)(C) OF THE ACT ON DISALLOWANCE OF EXCESS DEPRECIATION CLAIMED OF RS.4,08,808/- THAT IS WHOLL Y UNSUSTAINABLE IN LAW AND ON FACTS. BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THE FACT THAT THE CLAIM MADE BY THE APPELLANT WAS UNDER BONAFIDE MISTAKE WITHOUT ANY INTENSION TO CONCEAL INCOME OR TO FURNISH INACCURATE PARTICULARS OF INCOME. THE PENA LTY LEVIED BEING WITHOUT ANY MERITS AND JUSTIFICATION DESERVES TO BE QUASHED. 2. ASSESSING OFFICER LEVIED PENALTY OF RS.3,05,250/ - U/S. 271(1)(C) OF THE ACT FOR ALLEGEDLY CONCEALING INCOM E OF RS.8,34,189/- BY FURNISHING INACCURATE PARTICULARS OF INCOME. 3. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AU THORITY, WHEREIN CIT(A) CONFIRMED THE PENALTY IN QUESTION BY OBSERVING AS UNDER: THE ARGUMENTS OF A.O. AS WELL AS APPELLANT HAVE BE EN CONSIDERED. HAVING REGARD TO THE STRONG ARGUMENTS PUT FORWARD BY THE A.O., IT IS HELD THAT PENALTY HAS BE EN LEVIED CORRECTLY IN SO FAR AS DISALLOWANCE OF DEPRECIATION IS CONCERNED. THE APPELLANT CLAIMED THAT ITS CLAIM OF DEPRECIATION @50% IS THE RESULT OF BONAFIDE MISTAKE . HOWEVER, THE APPELLANT HAS GIVEN NO EVIDENCE IN SUP PORT OF ITS CLAIM. THUS, IT IS HELD THAT IN RESPECT OF DISA LLOWANCE OF ITA NO. 2114/AHD/11 A.Y. 05-06 [M/S. LUTHRA DYEING & PRINTING MILLS VS. DCIT] PAGE 3 DEPRECIATION, THE APPELLANT HAS FAILED TO SUBSTANTI ATE ITS CONTENTION THAT IT WAS A BONAFIDE MISTAKE. THE APPE LLANT HAS TO ESTABLISH THAT IT IS BONAFIDE MISTAKE. HAVIN G REGARD TO STRONG ARGUMENTS ADVANCED BY AO, THE PENALTY IN RES PECT OF DISALLOWANCE OF DEPRECIATION IS CONFIRMED. 4. BEFORE US, LEARNED AUTHORIZED REPRESENTATIVE SUB MITTED THAT SIMILAR ISSUE AROSE BEFORE ITAT, AHMEDABAD D BENCH IN INCOME TAX ACT NO. 660/AHD/2010 IN CASE OF INCOME T AX OFFICER VS. M/S. DESHRAJ TEXTURIZERS PRIVATE LTD., WHEREIN TRIBUNAL IN SIMILAR SITUATION HAS GRANTED RELIEF TO THE ASSESSEE BY OBSERVING AS UNDER: 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. THE FACTUAL POSITION ON THE BAS IS OF ASSESSMENT ORDERS AND SUBMISSIONS THAT EMERGES IS T HAT ASSESSEE HAD AVAILED LOAN FROM BANK UNDER TUF SCHEM E FOR PURCHASE OF MACHINERY. AS PER INCOME TAX RULES, APP ENDIX I, PART-III, ITEMNO.6, MACHINERY AND PLANT USED IN WEAVING, PROCESSING AND GARMENT SECTOR OF TEXTILE INDUSTRY, WHICH IS PURCHASED UNDER TUFS ON OR AFTER 1ST APRIL, 2001 BU T BEFORE 1ST APRIL, 2004 AND IS PUT TO USE BEFORE 1ST APRIL, 2004 ARE ELIGIBLE FOR DEPRECIATION @ 50%. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS IN THE BUSINESS OF MANUFACTUR ING OF TEXTURISED YARN AND HAD PURCHASED MACHINERY BY AVAI LING LOAN UNDER TUFS SCHEME. THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT SINCE IT HAS PURCHASED MACHINE RY BY AVAILING LOAN FROM BANK UNDER TUF SCHEME, IT WAS EL IGIBLE FOR DEPRECIATION @ 50% ON THE MACHINERY PURCHASED. THE CLAIM OF DEPRECIATION WAS NOT ALTOGETHER BOGUS. THE DISPUTE WAS ONLY WITH RESPECT TO THE RATE OF DEPRECIATION. THE BELIEF OF THE ASSESSEE IS NOT FOUND TO BE UNTRUE OR FALSE BY THE A.O. ON THESE FACTS IT CANNOT BE SAID THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS AND IS THEREFORE LIABLE TO P ENALTY U/S.271(1)(C ). IN THE CASE OF EAGLE FIBRES PVT. LT D. (SUPRA) THE CO- ORDINATE BENCH, ON SIMILAR FACTS HAD DELETED THE ITA NO. 2114/AHD/11 A.Y. 05-06 [M/S. LUTHRA DYEING & PRINTING MILLS VS. DCIT] PAGE 4 PENALTY BY HOLDING AS UNDER:- '5. WE HAVE CONSIDERED THE MATERIAL PLACED ON RECOR D. AS FAR AS THE REVENUE'S APPEAL IN RESPECT OF EXCESS CLAIM OF DEPRECIATION ON MACHINERY IS CONCERNED, TH E A.O. HAD MADE A DISALLOWANCE OF DEPRECIATION OF RS.18,04,688/- PRIMARILY ON THE GROUND THAT THE DEPRECIATION ON MACHINERY AND PLANT (TUF SCHEME) WAS ALLOWABLE @ 25%, HOWEVER, THE ASSESSEE HAD CLAIMED THE DEPRECIATION AT 50%. ACCORDING TO A.O., THE ELIGIBLE DEPRECIATION AS PER THE INCOME TAX RUL ES WAS ONLY 25%, HENCE, THE SAME WAS RESTRICTED TO THA T EXTENT ONLY. THE EXCESS CLAIM OF DEPRECIATION WAS AFFIRMED BY THE LD. CIT (A) IN FIRST APPEAL. CONSEQ UENT THEREUPON THE A.O. HAS THOUGHT IT PROPER TO LEVY TH E PENALTY. HOWEVER, WHEN THE QUESTION OF LEVY OF PENA LTY WAS CHALLENGED, LD. CIT (A) HAS NOTED, AS PER THE PARAGRAPH REPRODUCED ABOVE, THAT THE MACHINERIES WERE ONLY PURCHASED OUT OF THE LOAN GIVEN BY THE BA NK UNDER A TUF SCHEME FLOATED BY MINISTRY OF TEXTILE. THE ASSESSEE WAS UNDER AN IMPRESSION THAT THE CLAIM OF DEPRECIATION WAS AS PER THE SPECIFIC RATES PRESCRIB ED, HOWEVER, IT WAS FOUND BY THE A.O. THAT THAT SPECIFI C RATE OF DEPRECIATION WAS NOT ADMISSIBLE AS PER THE INCOME TAX RULES, 1962. 5.1. ON DUE EXAMINATION OF THE CIRCUMSTANCES, ONCE THE CLAIM OF DEPRECIATION WAS NOT ALTOGETHER BOGUS OR MALAFIDES BUT THE DISPUTE WAS IN RESPECT OF THE COR RECT RATE OF DEPRECIATION, THEN IN OUR CONSIDERED VIEW T HAT THOUGH THE RATE OF DEPRECIATION AS PER A.O. WAS COR RECT BUT ASSESSEE'S ACTION SHOULD NOT BE HELD AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. IT IS ALSO EVIDENT THAT STILL THE ASSE SSEE IS HARPING UPON THE INTERPRETATION OF APPENDIX ANNEXUR E TO I.T. RULES, 1962 FOR THE PURPOSE OF HIGHER DEPRECIATION ALLOWANCE, THEREFORE, THIS FACT ITSELF PROVES THAT THE CORRECT ENTITLEMENT OF DEPRECIATION WAS A DEBATABLE ISSUE. TO BUTTRESS THIS VIEW, WE PLACE RELIANCE ON A LATEST DECISION OF HON'BLE APEX COURT IN ITA NO. 2114/AHD/11 A.Y. 05-06 [M/S. LUTHRA DYEING & PRINTING MILLS VS. DCIT] PAGE 5 THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. , REPORTED AT (2010) 322 ITR 158 (SC),WHEREIN IT WAS LAID DOWN THAT NO PENALTY COULD BE LEVIED MERELY ON DISALLOWANCE OF A DEDUCTION, WHICH WAS MADE BY TAKING A DIFFERENT VIEW. FOLLOWING THIS DECISION, W E FIND NO FORCE IN THIS GROUND OF THE REVENUE AND AFFIRM T HE FINDINGS OF THE LD. CIT (A). 11. SINCE THE FACTS IN THE PRESENT CASE ARE IDENTIC AL TO THAT OF EAGLE SYNTHETICS PRIVATE LIMITED (SUPRA) AND SIN CE NOTHING HAS BEEN BROUGHT ON RECORD, TO THE CONTRARY BY THE REVENUE AND RELYING ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA) WE DO FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CIT (A). WE THEREFORE, UPHOLD THE ORDER OF THE CIT (A). NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE REGAR DING THE DECISION IN CASE OF M/S. DESHRAJ TEXTURIZERS PRIVAT E LTD. (SUPRA) ON BEHALF OF REVENUE. FACTS BEING SIMILAR SO FOLLOWING THE SAME REASONING, WE ARE NOT INCLINED TO CONCUR W ITH FINDING OF CIT(A) WHO HAS UPHELD THE PENALTY IN QUESTION AS DISCUSSED ABOVE BECAUSE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT SINCE IT HAD PURCHASED MACHINERY BY AVAILING LOAN FROM BA NK UNDER TUF SCHEME, IT WAS ELIGIBLE FOR DEPRECIATION @ 50% ON THE MACHINERY PURCHASED. THE CLAIM OF DEPRECIATION WAS NOT ALTOGETHER BOGUS. THE DISPUTE WAS ONLY WITH RESPEC T TO THE RATE OF DEPRECIATION. UNDER THESE FACTS AND CIRCUMSTANC ES, CIT(A) WAS NOT JUSTIFIED IN CONFIRMING PENALTY AND SAME I S DIRECTED TO BE DELETED. ASSESSEE AT RELEVANT POINT OF TIME WAS ENTITLED FOR ITA NO. 2114/AHD/11 A.Y. 05-06 [M/S. LUTHRA DYEING & PRINTING MILLS VS. DCIT] PAGE 6 50% DEPRECIATION. OUR VIEW IS FORTIFIED BY DECISIO N IN CASE OF M/S. DESHRAJ TEXTURIZERS PRIVATE LTD. (SUPRA). 5. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS ALL OWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 13 TH DAY OF MARCH, 2015. SD/- SD/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 13/03/2015 TRUE COPY S.K.SINHA & & & & ' ' ' ' ('% ('% ('% ('% / COPY OF ORDER FORWARDED TO:- 1. +, / REVENUE 2. / ASSESSEE 3. // 0 / CONCERNED CIT 4. 0- / CIT (A) 5. '45 , , / DR, ITAT, AHMEDABAD 6. 589 :; / GUARD FILE. BY ORDER / & ,